While most hedge fund investors are pouring their money into larger, more established firms, Swiss private bank Pictet & Cie is running the other way.
The firm's US$10 billion fund of hedge funds unit plans to increase its allocations to emerging hedge fund managers, with a consequent decrease in the amount it invests in the industry's big names. Pictet Alternative Investments could boost the amount it invests in smaller firms to 60% of its hedge fund assets, Bloomberg News reports.
"The typical situation in the aftermath of a crisis is people tend to focus too much on the risk and not enough on performance," Pictet AI CEO Nicolas Campiche said. "We're trying to refocus a bit of our portfolio on lesser-known entities, smaller, more nimble funds."
While returns are a major driver of the move, Campiche said risk plays a role, too: the risk inherent in relying on larger firms with long-tenured, high-profile managers.
"It's a more challenging environment and some that have nothing to prove any more, either to themselves or to the investor base, may just decide to do something else," he said. "That Druckenmiller risk is higher today than three years ago. This is a bit of new risk in our portfolio."
Stanely Druckenmiller, the founder of Duquesne Capital Management, abruptly announced in August that he would shutter the US$12 billion firm following three years of disappointing returns.